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The True Value of an Advisor

Published in Articles on November 18, 2015

You could spend a lifetime consistently making wise financial decisions based on time-tested principles only to see your finances all fall apart in short order. The fact is that this happens more often than many are willing to admit. Surprisingly, this could happen to you regardless of your financial acumen, or whether you are currently using or have used a financial advisor in the past.


The reality is that advisors don’t control financial markets, nor your savings or spending habits, much less the various other dynamic forces affecting your life and financial well-being. However, advisors can make you aware of the numerous pitfalls you may face as you traverse the various life-changing transitions that will surely arise. One of the most significant of these life-changing events is the transition into retirement.


Honest conversations about why you may not reach your retirement goals aren’t always comfortable, but can be invaluable in helping you achieve a successful retirement. So why do most affluent Americans fail to reach their retirement goals? Like many people, you may be quick to identify stock market returns or investment performance as the culprit. However, those that fall short of their goals do not fail because the stock market is “too volatile” and interest rates are “too low”.


Affluent Americans may not achieve a successful retirement for a variety of reasons. Some of those reasons may include: a fear of losing money in the stock market, a tendency to follow popular advice without considering the risks, an attempt to predict market movements and winning stocks or market sectors, a failure to plan for increasing health care costs, divorce, overspending assets, or even elder fraud. In many cases the effects of poor financial decisions do not appear until long after the decisions have been made, and in other cases the effects are felt almost immediately.


Consider just a few of the questions that affluent Americans will face during their lives: “How much do I need to save?”; “When should my spouse and I start our social security benefits?”; “Should I select a single or joint-life option on my pension at work?”; “How should I invest my retirement savings?”; “How can I protect my retirement assets?”; “How can I minimize my taxes now and in the future?”; “How much can I safely withdraw from my accounts during retirement?” Making these and other financial decisions without considering appropriate risks and probable outcomes can have irreversible, long-term negative effects on the success of your retirement.


Thus, continually identifying and avoiding the many hazards that threaten the success of your retirement should be the primary focus of you and your financial advisor. You may wonder, What is the winning formula to a happy and successful retirement?It starts with a plan that has clear goals and ways to measure progress toward those goals. In addition, it includes a trusted competent advisor that helps you focus on the long run, thus making you less susceptible to the pitfalls that lurk behind many of life’s financial decisions.


So how can you measure the impact that a financial advisor will have on your life and financial well-being? Assigning a value to your advisor is subjective and hard to quantify. For some the value of working with an advisor is peace of mind. In an attempt to quantify the impact of financial advisors on investment returns, Vanguard published research in March of 2014 titled, “Putting a value on your value: Quantifying Vanguard Advisor’s Alpha”. This research details the increased returns provided by financial advisors using the following best practices:



  • Suitable asset allocation using broadly diversified funds/ETFs
  • Cost-effective implementation (expense ratios)
  • Rebalancing
  • Behavior coaching
  • Asset location
  • Spending strategy (withdrawal order)
  • Total-return versus income investing


Vanguard’s conclusion was that advisors can potentially add three percent to investors’ average annual net returns by properly implementing the above strategies. It may not be what your advisor talks you into, but what he or she talks you out of, that will have the biggest impact.


Ultimately, your life is a sample of one. Average investment returns and the “average” investor experiences will not describe your specific returns and experiences. So, the impact your investment advisor will have on your life is for you to measure. When it comes to your finances, you might ask yourself “how well do I sleep at night?”


Aaron B. Sautter is a financial advisor with Onyx Financial Advisors, LLC, an independent fee-only registered investment advisor firm located in Idaho Falls, Idaho. He can be reached at (208) 522-6400 or at www.OnyxFinancial.com